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WINTER 2020
How to plan for transformation, the power of interpersonal collaboration in driving change, and the importance of giving employees space for transformative learning.
The Nuts and Bolts of Digital Transformation
DIGITAL
SPECIAL SPECIAL REPORTREPORT
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STRATEGIZING ABOUT DIGITAL CHANGE in your organization won’t get you anywhere unless you’re making plans and setting goals that people will actually execute. But most senior executives struggle to establish realistic expectations, largely because they don’t have a clear sense of how or why employees on the front lines adopt new tools.
Those are problems you can fix, says Paul Leonardi, a professor of technology man-agement at the University of California, Santa Barbara, in the opening article of this special report. By understanding the six phases of digital adoption, Leonardi explains, leaders can strategize in reverse. That entails knowing what the tools can achieve in local performance gains — and then working your way back to define meaningful company objectives and secure what’s needed to get things rolling in the first place: employee buy-in.
To spark transformation, it’s also critical to boost employee engagement and collaboration, according to Rob Cross and Wendy Murphy at Babson College, and Amy Edmondson at Harvard Business School. Their analysis suggests that certain leadership behaviors, such as creating an en-vironment of trust and imbuing work with purpose, determine how effectively people collaborate, how engaged they are, and how readily they embrace new ways of working.
Leading digital change involves giving employees space for transformative learning, as well. They need a low-risk “playground” to imagine who they might become, not just what they can do differ-ently, says Gianpiero Petriglieri, an organizational behavior professor at INSEAD. Petriglieri points out some of the biggest obstacles to such learning and explains how organizations can make it easier for individuals to explore uncharted territory in the quest for development and growth.
—The Editors
SPECIAL REPORT
1You’re Going Digital — Now What?
8A Noble Purpose Alone Won’t Transform Your Company
15Learning for a Living
THE NUTS AND BOLTS OF
DIGITAL TRANSFORMATION
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YOU’RE GOING DIGITAL — NOW WHAT?ENOUGH WITH THE TOP-DOWN STRATEGIZING. UNDERSTAND HOW CHANGE REALLY HAPPENS ON THE GROUND — AND PLAN FOR IT ACCORDINGLY.BY PAUL LEONARDI
At the 30,000-foot level of the corporate suite, plotting digital change is heady, ex-
citing stuff. Business leaders can almost smell the gains in efficiency and speed
and the data-driven increase in customer satisfaction when they think about all
the new tools at their disposal and how they might restructure their organiza-
tions. As one senior executive at a large telecommunications company recently
told me, “Mapping out a new approach to compete in the digital era has been so
cool!”
But here’s the decidedly less cool, more mundane truth that I’ve learned
after 16 years of working on such transformations with more than two dozen
companies across eight industries: Success depends less on strategic inspiration
than on the way people on the front lines implement new digital tools, and most leaders aren’t laying a
foundation for those employees to succeed. In large part, that’s because senior managers don’t have any idea
what really happens at the ground level. So they’re caught by surprise when tools don’t get used the way
they’re supposed to be (or even at all), data-driven insights prove unremarkable, and anticipated gains fail
to materialize. Their digital transformations become digital flops.
To avoid that fate, leaders must understand how digital tools come to be used widely and effectively so
that they can create an environment that provides optimal conditions. They can’t hand that work off to IT
and hope for the best.
28 MIT SLOAN MANAGEMENT REVIEW WINTER 2020 BRIAN STAUFFER/THEISPOT.COM
BRIAN STAUFFER/THEISPOT.COM
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In this article, using an automotive company’s
effort as an archetypal example, I’ll describe how
digital transformations tend to be experienced and
processed by those on the ground and then show
how reverse planning — working backward from
that reality, phase by phase, to set broad corporate
goals — leads to change that sticks. Plenty of arti-
cles offer theories about and strategies for digital
transformation. This one will help you anticipate
and manage the gnarly, often-ignored details that
destroy many a well-intentioned plan.
THE PHASES OF DIGITAL ADOPTION
Most digital transformation efforts are
launched with extensive rollout plans that
outline activities such as financing the
transformation, reorganizing the company to make
it agile enough to get the most out of digital tools,
developing data-driven insights that allow the
company to deliver more customized products, and
reducing time to market.
All of that is critical. But so is another process,
one that doesn’t get mapped out with similar rigor. I
like to refer to it as the Work Digitization Process, or
WDP for short. (See “How to Plan Your Company’s
Transformation.”) This is a set of six interlinked
phases of ground-level change that must happen for a
digital transformation to take off. More often than
not, these phases build upon one another, so early
wins presage later successes, while early failures make
each ensuing phase more difficult. To see how the
process unfolds, and to clearly understand the impact
of management action (or inaction), let’s look at how
things played out at one major international
automotive design company that we’ll call Autoworks.
PHASE 1: Leaders sell the digital transfor-
mation. Without widespread buy-in from employees,
any major change initiative will wither and die.
Digital transformations are no different. That’s why
the first step in a successful effort is to explain the
benefits of digital change to the workforce, which
may or may not be receptive to altering standard
operating procedures.
The leaders of Autoworks understood this. Like
many companies in the automotive industry,
Autoworks had embarked upon a digital transforma-
tion in the mid-2000s. One goal was to accelerate
product development while cutting costs in
resource-intensive areas. To launch a single new
model, for example, Autoworks would crash-test at
least 30 preproduction vehicles. Each test cost
roughly $750,000. New digital design tools, however,
could cut that figure drastically by allowing engineers
to build and test virtual cars on their computers. Even
better, those simulations would allow the engineers
to collect more data, further optimizing their ability
to design better, safer, cheaper cars. Eager to get
started, Autoworks’ senior leaders beefed up the com-
pany’s supercomputing center and licensed a slew of
digital design applications. The CEO declared, “We’re
going to be a digital company.”
Senior leaders were vocal and clear about the
change they wanted. Moving performance testing
onto digital applications meant that product devel-
opment could get done faster and cheaper. Directors
heard “faster and cheaper” in their staff meetings,
managers heard “faster and cheaper” in their division
meetings, and engineers heard “faster and cheaper”
over and over from managers, directors, and execu-
tives in training sessions, at conferences, during
all-hands meetings, and in everyday work. “Faster
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HOW TO PLAN YOUR COMPANY’S TRANSFORMATIONBy understanding how change naturally rolls out, you can start your planning with where you want to end up — identifying the gains in performance you can achieve with new digital tools — and work back from there to set company goals that employees will embrace.
Causal Chain of Events
Planning Process
Leaders Campaign for Buy-In on Goals
Employee Behavior Changes
Employees Decide Whether to Use Tools
Local Performance Improves
Employees Decide How to Use Tools
Performance Aligns With Company Goals
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and cheaper” became the mantra of the digital
transformation.
Studies show that employees listen when senior
leaders broadcast goals and announce bold initiatives
for achieving them.1 Early on, such pronouncements
create frames of reference that people use to under-
stand the technology they’re being asked to
implement. If you asked employees at Autoworks
how they would know whether new tools could
transform the organization, they would (and often
did) answer, “I’ll know if they help me build simula-
tion models faster and cheaper.”
PHASE 2: Employees decide whether to use the
new technology. Once leaders have brought digital
tools to the company, touted the anticipated benefits,
and adequately funded training, they fully expect
that employees will shift their work to the new
applications. There’s no guarantee that will happen,
though. My research has shown that roughly 40% of
potential users decided not to use the technology, even
when it was mandated by their direct supervisors.
That’s a big number — big enough, in fact, to
derail a digital transformation. So it’s important for
leaders to understand why so many employees
might make that choice. I’ve found that it’s typi-
cally not because the technology is inadequate (it’s
usually pretty good) and not because training is
poor (ditto). Rather, employees consider whether
the technology enables them, as individuals, to
carry out the goals announced by the company’s
leaders. At Autoworks, that meant that the engi-
neers asked themselves, “Will this software help me
develop new car designs faster and cheaper?”
As it turned out, not everyone thought it would,
so “faster and cheaper” was more complicated rhet-
oric than Autoworks’ leaders had imagined. The
phrase inadvertently encouraged people to com-
pare the new tools with the old ones they knew
inside out and could already use quite efficiently.
Some of the company’s top engineers, who served
as early adopters, did just that — and decided that
it was in their company’s best interest for them to
stick with the tools they were already using, because
the new software actually slowed their work down.
Although they could see that it had other distinct
advantages for the organization, they rejected it for
failing, in their experience, to create the gains that
company leaders had deemed most important.
Making matters worse, other engineers decided
that if a colleague they respected had rejected the
new software, they didn’t even have to give it a try.
The early experimenters thus became negative in-
fluencers in the network of company engineers,
although their comfort with the old tools may have
tainted their perception of the new ones.
Of course, senior leaders had intended that
“faster and cheaper” would be seen as the broad goal
of the transformation effort. They hadn’t consid-
ered how those words might scan at various levels
and influence granular decision-making. That’s
why senior leaders must take great care in crafting
their rhetoric. If it doesn’t match up with the reality
of how work gets done, their prized new technology
won’t get implemented in the way they hope.
PHASE 3: Employees decide how they will use
the new technology. Even if the new technology en-
counters a band of naysayers, the many employees
who do make the switch will come to a second criti-
cal decision: how to use it. This, too, is a complicated
choice with significant long-term ramifications.
Almost any digital technology, whether for busi-
nesses or for individual consumers, can be adopted
in many different ways. (Think of Microsoft Excel,
for instance, with its hundreds of features and pos-
sible uses.) But in a digital transformation, the
features people choose to apply are deeply conse-
quential, because they determine what kind of data
will be recorded, produced, or analyzed, and how
that data will be used.
Autoworks’ leaders believed that data was a key
benefit of moving design processes into a digital envi-
ronment. The use of simulation tools would make it
possible for engineers to run hundreds or thousands of
iterations of crash tests or noise and vibration tests. By
comparing all those results, engineers would be able to
optimize a vehicle’s design with far more sophistica-
tion than when the company ran a few dozen wrecks
with crash test dummies. At least, that was the theory.
For one year, I tracked two departments that
used the same digital tool for automating simula-
tion designs. In one department, engineers engaged
with the tool in widely varying ways, according to
individual preference. In the other, every engineer
used the same features in the same order. By the end
of that year, the vehicles designed by the latter group
were outperforming those created by the former by
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a 2-1 margin. Why? Because the data produced by
the engineers who had followed the same path with
the same features had a uniform foundation and
could be analyzed for patterns of effectiveness. The
engineers who had followed their own paths pro-
duced just as much data, but the information arose
from varying assumptions and choices. These kinds
of differences around the company made it difficult
to create a set of best practices for the new digital
tools. If a central value of digital technologies is the
creation of data that can be mined for efficiencies
and other valuable learning, shaping consistent
usage patterns is essential.
PHASE 4: New kinds of data change the way em-
ployees behave. In its pre-digital days, Autoworks
had developed a handoff approach for moving data
across the company. In the case of vehicle design
testing, the standard operating procedure went like
this: Engineers conducted crashes and various other
tests, collected the data, and passed it along to the
data analysis group, where analysts tried to glean
universal principles for good vehicle design. There
were engineers; there were data analysts. The differ-
ence between the two groups was clear.
Remember those engineers who used the new
digital simulation tools in consistent ways to pro-
duce comparable data? They’re the ones who started
to change the status quo. They could see the results
of their own tests, of course, and could examine re-
sults in the aggregate. But they went a step further
and started talking to one another about their re-
sults and thinking about them together. As one
engineer commented, “Now that we’ve gone digital,
our roles as design engineers are changing.” Instead
of being siloed away from one another while they
ceded analysis to an equally siloed data analysis
department, the design engineers had become a
collaborative team of data analysts.
Some “by the book” managers tried to curtail
this empowerment by insisting on keeping analysts’
and engineers’ responsibilities separate. But this
process — of more and better data changing tasks,
resulting in changed roles and relationships — is an
inevitable byproduct of digital transformations. At
their core, relationships between people in differ-
ent roles are based on data. When employees start
performing new roles because they have new data
and information, they necessarily start interacting
with different people. The result is the formation
of new and initially invisible social networks.
According to some research, these powerful new
networks may be the most important ingredient in
driving digital transformations.2
PHASE 5: Performance improves locally. There’s
often a dichotomy between the targets business
leaders impose for their digital transformations and
the benefits employees experience at a local level.
Once they were effectively using the new digital
tools and comparing results with others in their
emerging social network, Autoworks’ engineers
started to see concrete gains that they could appreci-
ate. For instance, they found that it was becoming
easier for them to optimize designs to improve such
key variables as crashworthiness and fuel economy.
The process of moving from testing to final de-
sign solutions improved significantly as well. In fact,
according to my analysis, engineers who changed
their roles to incorporate data analytics and shifted
their social networks to interact with other engi-
neers solidified the design of their vehicles 23%
faster and with 31% fewer laboratory tests than en-
gineers whose roles didn’t change. In other words,
engineers were working faster and cheaper, after all.
That sounds like the kind of success Autoworks’
leaders had been hoping for. It is, but with two im-
portant caveats. The first, of course, is that 40% of
engineers had initially rejected the software because
they hadn’t found it obviously faster and cheaper. The
second is that those engineers who did achieve faster
and cheaper gains arrived at them via metrics that
mattered to them in their roles, like design quality
improvements. If senior executives had customized
Senior leaders must take great care in crafting their rhetoric. If it doesn’t match up with the reality of how work gets done, their prized new technology won’t get implemented in the way they hope.
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their rhetoric early on to resonate with engineers’ own
experience of their work, they might have motivated
more engineers to adopt the new digital tools sooner
and secured even more significant gains.
PHASE 6: Local performance aligns with com-
pany goals. A digital transformation gets traction
when it meets key corporate goals by employing tech-
nologies that improve local processes and results.
One reason Autoworks chose to focus intently on
vehicle design is that 20 years of robust statistical
analysis had identified that process — along with
supply chain, regulatory compliance, and manufac-
turing efficiency — as critical to reducing the time it
took to get cars from concept to dealer. Better time to
market would accelerate top-line growth.
Needless to say, the company was happy that the
technologies led to faster and cheaper designs.
Rather than sit on its laurels, however, Autoworks
conducted a deep analysis of how the gains had been
achieved. That’s how it discovered the remarkable
value of the social network that had been unleashed
by the new design software: Engineers who spent
three times more hours discussing vehicle design
with one another than they spent instrumenting
simulation models dramatically reduced the amount
of rework that needed to be done in later stages of
development. Sure, new software helped engineers
speed the delivery of a final, optimized vehicle de-
sign, but the dialogue spurred by the software
accelerated things even more. By digging into its suc-
cess, Autoworks uncovered knowledge that could
fuel further improvements in the years ahead.
PLANNING IN REVERSE
T he six phases I’ve just described illustrate the
way change develops internally during a digi-
tal transformation. Now let’s turn to how
understanding this process should shape planning
for your own company’s transformation. As I men-
tioned earlier, the best way to plan is in reverse:
Start by assessing what company goals you can
achieve locally with new digital tools, and build
from there. In my experience, business leaders can
kick-start this process effectively by answering
three questions.
1. Which local activities have the most poten-
tial to transform your company? Many corporate
leaders know where they’d like their company to go,
but few have a clear sense of how to get there.
Identifying the local activities with the highest
potential to transform will affect which digital tools
you bring in, inform how you lay the groundwork
for implementation, and buttress your efforts to
rally the company behind the changes you seek.
First, you’ll need to assemble and analyze your
company’s data about what kinds of local outcomes
best drive big organizational goals. For instance, I
once worked with a large children’s hospital that re-
ceived many emergency transfers from community
hospitals and had identified an urgent need to im-
prove survival rates for these vulnerable patients.
Digging deep into its data, the children’s hospital
discovered an undeniable link between transfer pa-
tients’ survival and the quality of the initial diagnosis
before they arrived. Seeing this link allowed the hos-
pital to target a specific solution: a digital platform
BUSTING MYTHS ABOUT DIGITAL CHANGEImplementing transformation often belies the hype.
THE PERFORMANCE MYTH: New technologies have immediate and direct effects on performance. REALITY CHECK: New technologies usually have, at best, an indirect effect on organizational performance. They change the way employees perform their tasks, which alters people’s roles, which alters the networks of people who work together on tasks. Ultimately, these changes in roles and social networks are what drive improvement in key performance metrics.
THE NOT-MY-JOB MYTH: Implementing new technologies is the IT department’s job. REALITY CHECK: Implementation is a job for business leaders. Most IT depart-ments are accustomed to managing support applications, like Microsoft Office and CRM software. But today’s powerful digital tools allow users to manipulate and analyze data in ways that can reinvent an organization. Rolling them out re-quires keen business insight and management skills. Senior leaders are most equipped to sort out where to deploy them and to understand how the tools might reshape the culture. They’re the ones who know which influencers can accelerate adoption and which bureaucratic obstacles must be cleared. They’re in the best position to ensure that employees actually use the technology so that they can meet the company’s objectives.
THE FAILURE MYTH: Most digital transformation efforts fail because the technology didn’t work. REALITY CHECK: Most digital transformation efforts fail because employees didn’t use the new technology. There are two main reasons for this. First, when people are not sufficiently trained, they can’t apply new tools effectively, so they stop using them and find alternatives. Second, when leaders promise certain outcomes that don’t quickly materialize — like an increase in customer satisfaction or swifter time to market — employees will make a principled deci-sion that it’s in the best interest of the company for them to find other methods to secure those outcomes.
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that allowed community hospital physicians with
little expertise in pediatric emergency care to record
details about a child’s physical condition that could
be easily read by the expert nurses and physicians at
the children’s hospital, making it easier to appropri-
ately triage transfer patients.
After you identify local activities that can drive
success, it’s important to measure the impact of
your digital efforts in order to improve them.
Sometimes those metrics are clear: The hospital
knew it was succeeding, for example, when survival
rates for transfer patients increased significantly.
When the metrics aren’t so obvious, it helps to
break down whatever process you’re trying to im-
prove into discrete steps.
For instance, one large financial services company
I worked with was intent on increasing knowledge
sharing. That’s a pretty multifaceted process, so we
broke it down into several steps, like helping employ-
ees accurately identify experts and communicate
with those experts. Then we launched surveys to
gauge how accurately employees assessed one anoth-
er’s expertise and what volume of communication
between people best facilitated knowledge transfer.
With those baseline scores in hand, the company
implemented an enterprise social networking tech-
nology that allowed employees to see what other
people were working on. By tracking changes in the
two measures every six months, we were able to mon-
itor the progress of the knowledge-sharing initiative.
That kind of local data is essential for any digital
transformation. It’s the only way to know whether
behaviors deep within the company are enabling or
hindering your change effort.
2. How can you foster information flow and be-
havioral change in your organization? Business
leaders must create an environment that encourages
and allows their people to achieve the local perfor-
mance gains that will drive transformation. To make
the most of powerful new data and analytics, employ-
ees need to be able to change tasks, roles, and social
networks fluidly. Leaders can free them up to do so by
understanding information flow and removing insti-
tutional obstacles to the positive social change that
follows an injection of powerful new data.
How does a diagnosis of information flow help?
Consider the example of a large public utility I
worked with. The company saw great potential for a
new digital technology that allowed for remote
monitoring of utility consumption. By constantly
measuring usage and sending repair crews out pre-
emptively, the utility could avoid disastrous failures
of transmission equipment. But how could the in-
formation flow within the company ensure that this
preventive maintenance actually took place? The
billing department, which already monitored usage
on a monthly basis, would have to coordinate with
the maintenance department, which was accus-
tomed to increasing and decreasing the number of
workers on the clock according to peaks or valleys in
demand. This meant that some employees in billing
would have to shift from being mere data aggrega-
tors and bill producers to being analysts (much like
the engineers at Autoworks). Recognizing this,
company leaders set up training sessions, estab-
lished new targets for employees who made the
transition, and hired new employees who already
had these skills. In the wake of this effort, a new
social network arose consisting of employees de-
voted to preventive maintenance, and the digital
transformation proved a great success. This kind
of diagnostic work is often called organizational
network analysis; it’s one of the most useful and
unheralded tools for digital change.3
As the example makes clear, it’s not enough for
business leaders to know who will be employing the
new technologies. They also have to know how
groups of employees currently interact, so they can
support the new social networks that are so critical to
success. One of the reasons employees don’t end up
collaborating with the right people during a digital
transformation is that their formal roles are mis-
aligned with their emerging roles. If you don’t enable
a formal role transition for your employees and
codify the changes by altering job descriptions and
how you evaluate people’s performance, they will
be unmotivated to develop the skills to be good col-
laborators with their new social network partners.
3. Who are your key influencers, and how can
they help your culture become digitally ready?
Remember those key influencers at Autoworks? Most
helped drive adoption of the new digital tools, but a
sizable minority became naysayers who led col-
leagues to avoid the new digital tools altogether. By
identifying influencers before the launch of a digital
transformation, you can enlist them in your efforts to
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broadcast the promise of the coming digital change.
I once worked with the leaders of a large medical
device manufacturer that was about to embark on a
digital transformation entailing the introduction of
new technologies and a significant structural reorga-
nization. They had a big problem: A faction of
midlevel executives opposed the effort. The leaders
worried that if these naysayers dragged their feet, they
might sink the transformation in a bureaucratic mire.
Based on the Work Digitization Process, I knew
that the best way to counter this opposition was to
recruit the company’s key influencers. Influencers
aren’t necessarily the most popular people or those
highest on the food chain. More often than not,
they’re central players in the informal advice-seeking
networks of the company. To identify them, I con-
ducted an organizational network analysis by
asking employees two simple questions: “Whom do
you go to for advice about technical issues?” and
“Whom do you go to for advice about strategic is-
sues?” That helped identify the 10 key influencers
in each business unit.
It was then important to turn as many of them
as possible into proponents of the new changes. I
started by interviewing each one and learning
about their initial reactions to the change. Some
liked both the new digital tools and the reorg; oth-
ers thought both were terrible; and a third group
was mixed — they liked the reorg but not the tech-
nology, or vice versa. I then developed an internal
marketing plan for each group. Working with the
company, I provided hard data that supported the
first group’s inclination, giving them something
concrete to point to when evangelizing. Company
leaders and I then met with the second group to
show how the changes could amplify the positive
aspects of their current work patterns and discuss
ways that things they didn’t like could be improved.
We provided the third group with examples of how
the reorg and the new technologies could build on
each other to drive significant change. That solidi-
fied support and won over quite a few skeptics. We
deepened the influencers’ involvement by asking
them to help us generate the messaging that would
convey the benefits to the bulk of the workforce.
We didn’t win everyone over. But taking the
influencers seriously paid big dividends. In the
business units where we worked with influencers,
the company saw a more than 75% adoption rate
for the new digital tools; in the few business units
that we didn’t work with, less than 25% of employees
got on board.
BEHIND THE GLIMMERING PROMISE of becoming
a digital company lies a stark reality: Implementing
digital technologies to create meaningful change is
hard work. To make a digital transformation take off,
business leaders have to first understand the internal
chain of events that is set off by the introduction
of new technologies. Only then can they lay the
groundwork for success, working from the end of
that chain (those places where local improvements
can drive big corporate goals) to the beginning
(where business leaders exhort the workforce to sup-
port a massive digital disruption of the status quo).
Success doesn’t automatically arise from sparkling
rhetoric and bold promises. Instead, it depends on
decisions made by employees on the front lines. The
reverse planning outlined in this article will help
them make the right choices.
Paul Leonardi (@pleonardi1) is the Duca Family Pro-fessor of Technology Management at the University of California in Santa Barbara. He advises companies on how to use the data enabled by new technologies to lead digital transformation. Comment on this article at http://sloanreview.mit.edu/x/61215.
REFERENCES
1. D. Leonard-Barton and I. Deschamps, “Managerial Influence in the Implementation of New Technology,” Management Science 34, no. 10 (October 1988): 1252-1265; and W. Lewis, R. Agarwal, and V. Sambamurthy, “Sources of Influence on Beliefs About Information Tech-nology Use: An Empirical Study of Knowledge Workers,” MIS Quarterly 27, no. 4 (December 2003): 657-678.
2. G.C. Kane, A. Nguyen Phillips, J.R. Copulsky, et al., “The Technology Fallacy: How People Are the Real Key to Digital Transformation” (Cambridge, Massachusetts: MIT Press, 2019); and J. Battilana and T. Casciaro, “Change Agents, Networks, and Institutions: A Contingency Theory of Organizational Change,” Academy of Management Journal 55, no. 2 (April 2012): 381-398.
3. R. Cross and A. Parker, “The Hidden Power of Social Networks: Understanding How Work Really Gets Done in Organizations” (Boston: Harvard Business Press, 2004); and S.P. Borgatti, M.G. Everett, and J.C. Johnson, “Analyzing Social Networks,” 2nd ed. (Thousand Oaks, California: Sage, 2018).
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